USDJPY Keeps the Uptrend After the BOJ Minutes

USD/JPY continues its bullish trend, consistently finding support at Moving Averages (SMA) and the BOJ minutes didn’t help. This level remains crucial for evaluating the durability of the bullish momentum, with buyers consistently entering the market at this point. The recent Bank of Japan (BoJ) meeting provided little new information, contributing to the bullish sentiment for the pair.

The release of the BoJ meeting minutes last night also did not offer much insight, reinforcing the current trend. In yesterday’s European session, USD/JPY surpassed the 158.00 level as the US Dollar (USD) rebounded sharply after a brief dip. The strength of the USD was bolstered by Federal Reserve (Fed) policymakers reiterating their expectation of only one rate cut this year, contrary to financial market expectations of two rate cuts by year-end, so at the moment the USD is sort of uncertain, but on the other hand, the JPY has nothing going for itself, as last night’s BOJ minutes showed. This leaves buyers in charger until the situation evolves.

USD/JPY Chart H4 – MAs Keeping the Trend Bullish

This expectation was fueled by the May Consumer Price Index (CPI) report, which indicated a faster decline in inflation. Additionally, disappointing US retail sales data suggested weakening consumer spending, which further supported the market’s belief that the disinflation process is continuing even as the US economy shows signs of softening.

Bank of Japan June Meeting Minutes

• Consumption Outlook: Members agreed that consumption is likely to increase moderately.
• Price and Wage Increases: A few members noted that companies might raise prices and wages more than initially expected.
• Impact of Weak Yen:
  • Discussed risks associated with the weak yen’s impact on inflation.
  • One member stated the impact might not be temporary.
  • Another member suggested the weak yen could lead to an overshoot in underlying inflation.
• Monitoring Import Costs: BOJ must scrutinize how firms might pass on rising import costs through price hikes.
• Monetary Policy Response:
  • FX volatility affecting inflation expectations could necessitate a policy response.
  • Members shared the view that FX is a key factor affecting the economy and prices.
• Future Rate Hikes:
  • Debate needed on timing and degree of future interest rate hikes.
  • Consider raising rates moderately before being fully convinced about hitting the price goal to avoid rapid hikes later.
  • Raise rates appropriately to avoid economic stress.
  • Policy normalization could accelerate if inflation overshoots due to the weak yen.

USD/JPY Live Chart